Lease-to-own solar for MSEs in Kenya

Executive summary 

Micro and Small Enterprises (MSEs) are the backbone of Kenya’s economy, accounting for 24% of GDP. Despite Kenya’s progress in expanding electricity access, many MSEs continue to face unreliable supply, high tariffs and dependence on costly diesel generators. 

The program deploys roof-mounted solar systems, with optional battery storage, through a lease-to-own financing model. By removing the high upfront investment barrier, the program enables businesses to transition while building asset ownership over time. The program targets retail and service businesses with productive energy needs as well as agricultural and fisheries service centres. 

Over a 7-year period, the program aims to: 

• Enroll 3,000-5,000 MSEs
• Roll-out 15-40 Mwp of solar capacity 
• Increase beneficiary business incomes 

The program will be financed through a blended-finance structure, combining grants and private capital to ensure affordability, manage credit risk and crowd in commercial investment. Beyond energy reliability and access, the program will contribute to Kenya’s Vision 2030 by focusing on MSE development and inclusive economic growth, while demonstrating a financially sustainable and scalable model for productive-use solar deployment. 

Strategic context 

Electricity challenges 

Kenya’s electricity system faces challenges of access gaps, reliability failures and rising demand. Despite progress, only 76% of Kenyans had electricity access in 2023 (World Bank, 2023). 

Even for connected customers, service quality remains poor. EPRA’s 2025 national reliability indices show that consumers experienced on average per month: 

• 9.42 hours of interruptions (System Average Interruption Duration Index; SAIDI)
• 3.57 outages (System Average Interruption Frequency Index; SAIFI)
• 2.57 hours of interruption per outrage (Customer Average Interruption Duration Index; CAIDI)

Electricity in Kenya remains costly with tariffs, ~$0.22/kWh, among the continent’s highest (World Bank, 2020; IEA, 2024). The total cost is further increased as households and firms are being forced into costly backup systems with diesel generators (EPRA, 2025). 

Meanwhile, small commercial customers represent 17% of national consumption, up 11% from the year before, demonstrating the rising energy needs of the country’s productive economy (EPRA, 2025). 

Solar potential 

Kenya offers consistently high solar resource conditions, with national maps indicating 5-7 kWh/m²/day. Moreover, around 70% of the land is suitable for efficient solar generation and Kenya’s low photovoltaic seasonality score (1.38) supports predictable, year-round generation (Global Solar Atlas, 2019). 

Despite favourable conditions, solar energy remains underutilized, contributing to only ~ 4% of total electricity generation with embedded and captive installations being modest at 300 MW (EPRA, 2025). 

Solar adaptation 

Kenya has seen notable progress in off-grid solar access for households, with around one in five rural households using standalone solar systems or mini-grids (IEA, 2024). Moreover, the commercial and industrial segment is being served by international private sector providers. However, the middle segment of MSEs remains largely untapped. 

High upfront investment requirements have constrained the scale of solar market development, limiting adoption beyond larger customers. This has locked micro and small enterprises into high operating costs, driven by unreliable grid supply, continued reliance on diesel backup generation and high electricity tariffs (Uzziah et al., 2024). 

Micro- & small enterprises 

Micro and Small Enterprises are a critical driver of Kenya’s economy with Micro Enterprises (fewer than 10 employees) alone contributing to 13% of the GDP and Small Enterprises (10–49 employees) contributing to 11% (Mulae, 2022).

Impact of the current energy situation on Micro and Small Enterprises: 

• Lost opportunity: Power outages disrupt operations, reduce productivity, and cause lost sales. Firms lose an estimated ~5% of annual sales due to electricity outages (World Bank Enterprise Survey, 2018; NERC, 2019). 

• Direct costs: Electricity in Kenya is already among the continent’s highest, and 65% of firms reportedly own or share a diesel generator to cope with outages, which further increases direct operating costs1(World Bank Enterprise Survey, 2018; NERC, 2019). 

• Indirect costs: Disrupted temperature-sensitive processes lead to loss of value of perishable goods (Sollatek, 2023). In addition, voltage fluctuations are common in many parts of Kenya and contribute to premature damage of equipment (Nyawira, 2021). 

Program description 

Objective 

The objective is to improve SME productivity and energy resilience, while strengthening the local solar market actors. These objectives can be summarized accordingly: 

Table 2: Objectives 

The lease-to-own solar program 

The programme supports the deployment of lease-to-own solar solutions for MSEs in Kenya by addressing the key barrier to solar adoption: high upfront investment costs. 

High level lease-to-own model: 

• Businesses make a small upfront payment covering installation
• Monthly payments are made over 6 to 48 months
• Payments are collected via mobile money platforms (or regional collection points)
• Ownership of the system transfers to the customer at the end of the lease term 

As most solar companies (hereafter “PV companies”) lack the working capital to extend credit directly to Micro and Small Enterprises, the programme channels a combination of grants, concessional and private capital to PV companies, enabling them to deploy lease-to-own systems without requiring full upfront payment from end users. The grant / concessional capital absorbs partly early-stage credit and market risk, enabling private lenders to participate and allowing affordable pricing. 

The PV company retains ownership of the system during the lease period and is responsible for sales, distribution and installation. MSE customers enter into a lease-to-own agreement and make fixed monthly payments to the PV company. 

Ownership of the solar system transfers to the MSE after the lease period, allowing MSEs to benefit fully from low operating costs for electricity after paying off the system. After ownership transfer, MSEs may continue to subscribe to optional maintenance and service agreements. 

Illustration 1: Financial flows

Beneficiaries 

1. Grid-connected micro and small enterprises (MSEs) 

The primary beneficiaries are grid-connected Micro and Small Enterprises. The programme prioritises formal MSEs operating from permanent premises, enabling long-term solar investments (KNBS, 2016). 

2. Local service networks and community-based agent 

Community-Based Agents, installers, and maintenance providers benefit through skills development, employment, and long-term service contracts. 

3. Domestic solar PV industry 

Kenya’s domestic PV industry benefits from increased demand for productive-use systems, improved access to working capital and strengthened operational capabilities, supporting sector growth and professionalization. 

Scope 

Phase 1: Pilot Y0-Y1.5: The program will start with a pilot in 3 counties (Kiambu, Nakuru and Kisumu) representing diverse counties and MSE profiles, dense MSE allocation and stellar solar conditions. 

Phase 2: Roll-out Y1.5-Y7: The programme will scale-up, conditioned on demonstrated performance. 

Illustration 2: Pilot counties Table 3: Pilot counties' characteristics 

Table 4: Scope phase 1 & 2 

Program KPIs 

Table 5: Clean energy access KPIs 

Table 6: MSE productivity & competitiveness 

Table 7: Innovative business model for PV industry

Program’s national and development alignment 

The programme aligns with Kenya Vision 2030 and the National Energy Compact 2025–2030, which prioritise private-sector-led delivery of clean, affordable energy to support productivity and competitiveness of the economic sectors (MEPD, 2025). Moverover, it directly supports SDG 7 and SDG 8, while contributing meaningfully to SDGs 5, 9 and 13 (UN, 2015). 

SDG 7: Affordable and Clean Energy 

• Expands reliable and affordable energy.
• Improves energy reliability and quality.
• Accelerates distributed renewable energy. 

SDG 8: Decent Work and Economic Growth 

•Strengthens productivity of MSEs.
• Lowers operating costs while reduces downtime, lost sales, and operating risk. ● Enables enterprises to scale into higher-value, electricity-dependent activities. 

In addition: 

• SDG 5 - Gender Equality: Many MSEs and cooperatives are women-owned or women-led.
• SDG 9 - Industry, Innovation and Infrastructure: Supports innovation in delivery models.
• SDG 13 - Climate Action: Reduces reliance on diesel generators. 

Program implementation 

The programme implementation follows a trust-based journey with physical presence, covering key areas such as rapid eligibility assessment and post-installation engagement. 

Table 8: Implementation flow 

Awareness 

Consideration 

Eligibility and feasibility 

Installation and onboarding 

Monitoring, service and upsell

Risks & migitations

References 

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Global Solar Atlas. (2019). Global Solar Atlas: Kenya. Global Solar Atlas. https://globalsolaratlas.info/global-pv-potential-study 

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IEA. (2024). Kenya 2024 - Energy Policy Review. International Energy Agency. https://iea.blob.core.windows.net/assets/98bc7ce1-b22d-48c9-9ca2-b668ffbfcc4b/Ken ya2024.pdf 

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Nyawira, C. (2021). Reliable electrical power equals a stronger economy and better quality of life. Lendahand. https://www.lendahand.com/en-EU/blog/798-reliable-electrical-power-equals-a-strong er-economy-and-better-quality-of-life-here-s-what-sollatek-is-doing-about-it 

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World Bank Enterprise Survey. (2018). Economies - Formal Sector Enterprise Surveys - Kenya. World Bank Enterprise surveys. https://www.enterprisesurveys.org/en/data/exploreeconomies/2018/kenya